CPI Lower Than Market Expectation

The Consumer Price Index (CPI) rose to 5.5% in June, Statistics South Africa (Stats SA) announced on Wednesday.

“This rate was 0.1 of a percentage point lower than the corresponding annual rate of 5.6% in May 2013,” said Stats SA.

Market expectation was for CPI – used to measure inflation – to come in at 5.7%.

Nedbank said: “The downside surprise relative to our forecast stemmed from very subdued food prices. Prices in the food and non-alcoholic beverages category increased by 0.1 % month-on-month in June. We expected a 0.5 % rise.”

The main drivers of the annual increase were housing and utilities, which contributed 1.4%, miscellaneous goods and services, food and non-alcoholic beverages.

The bank had expected annual inflation to accelerate to 5.8%.

“The slowdown in the June inflation number was unusual as June is a heavy survey month. But this slowdown may not be sustained as a rather large increase in the petrol price needs to be factored into the July number. Also, the pass-through from the weaker rand to inflation has been relatively muted so far, and this is expected to exert some upward pressure on inflation in the coming months,” noted Nedbank economists.

At the July Monetary Policy Committee (MPC) meeting of the Reserve Bank, the MPC upwardly revised its inflation forecast to 5.9% in 2013. It also expects inflation to peak at 6.3% in the third quarter.

Standard Bank economists expect inflation to peak at 6.1% in the third quarter and average 5.9% in 2013.

“The main risks to our forecast include movements in the exchange rates and increasing food and fuel prices. Lower electricity tariff hikes are likely to offset the increase in July’s CPI print; however, base effects will lift the print significantly.

“A better-than-expected print is rand positive; however, doesn’t change our rates view that the SARB will remain on hold in 2013,” said Standard Bank economist Thabi Leoka in a research note.

SA Government News Agency

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